Right to Buy Scheme

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Right to Buy Scheme

Stephen talks to us about the Right to Buy scheme.

Is the Right to Buy scheme still available?

It certainly is. We’re talking in June 2024 and I’ve done a number of Right to Buy mortgages this year already. So it’s still there, it’s still being used, and it’s generally still fantastic value for money.

What does Right to Buy mean and how does it work?

If you are a tenant with your local council and you’ve had a certain amount of years of renting, you’re allowed to buy the property. They will also give you a discount, which in some cases can be considerable.

With the last mortgage I did, the client got a 70% discount, which was massive. She was in her late 50s and she’d lived in her home for something like 36 years. The property value was about £200,000 – so getting a 70% discount off that is absolutely enormous.

It does come with some restrictions. You couldn’t just buy that property from the council and sell it straight away. It’s pro rata, so you would have to give more or less all the discount back.

If you sold it after the first year, you would give back a lower percentage – and that scales down for the first five years. After five years, you can sell the property and whatever it achieves is yours.

Who is eligible for Right to Buy?

Ordinarily, it’s the person on the tenancy. But in some cases, if family members have lived in the property for the last 12 months, they can actually buy that property as well. The discount is based on how long the main tenant has lived there.

But for argument’s sake, if you’ve got a boyfriend or girlfriend that’s moved in, you’ve lived there for 20 years and they’ve lived in the property for 12 months or more, they can go on the Right to Buy application with you.

What about joint applications, how does that work?

If I’ve been renting from the council for 15, 20 years and you move in with me, as long as you’ve been in that property for a minimum of 12 months, we can do a joint application.

With the recent Right to Buy mortgage I referred to, the son went on the mortgage as he had lived all his adult life in that property as well. So mum and son took out a joint mortgage.

What is the process if I do qualify for Right to Buy?

It can be a slow process because you’re dealing with the Council and they can be busy, which slows down the process. Ordinarily, you would apply for Right to Buy and fill the forms out. They would say initially whether you qualify, and if you did, they would instruct a valuer to come around and visit the property.

Depending on the valuation, they would apply the council discount and send you the paperwork. You have a certain amount of time to return these and confirm you’re exercising your Right to Buy.

They send you an offer that’s applicable for 30 days. You sign the paperwork and at that stage we would apply for mortgages.

It can still be slow, because you have your own solicitor to purchase the property, and the council would use their legal department. Certainly, the councils I deal with in my area are all a bit on the slow side. The process itself is quite simple, but it does always take a little bit longer than normal.

I had a client at the beginning of last year, in January 2023. They contacted me as a matter of urgency – they had their Right to Buy and needed to exercise it within the next 30 days. They wanted a Mortgage in Principle and then to get a mortgage.

The council on that particular case took about 10 months to get everything sorted out – yet we were rushing around back in January. It completed at the end of October – it took forever.

They don’t all take as long as that. There were certain things with this particular property and it had an additional piece of land. But everybody assumes when they get the offer from the council that it’s got to go at a million miles an hour.

Do I need a deposit for Right to Buy?

No, you can actually use the discount that the council generously gives you. With the last few I’ve arranged, no-one has actually put any money in themselves. The lender will accept the discount because from their perspective, the loan they offer is much less than the property value.

If you got a 50% discount off a £100,000 property, as a nice easy example, the lender’s giving you £50,000 for that property. They know there’s plenty of equity in it if the worst were to happen.

So a lender can use the discount as the deposit. You do have the ability to put additional savings in if you like, and the benefit is that it makes your mortgage cheaper.

What’s the discount if you live in a house and if you live in a flat?

The discount is the same. It’s just how it’s built up that differs. The maximum discount is 70% in both cases. On a house, once you’ve lived there for five years, you get an extra 1% discount for every year. Whereas with a flat, it’s 2%.

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Can I let my Right to Buy property?

Yes, you can, but ordinarily you’re arranging that on a residential mortgage rather than a Buy to Let mortgage. So if you want to rent it, we would have to change the mortgage or obtain Consent to Let.

With some flats you may also need to get permission from the leaseholder – which is still the council.

Are there options if I’m refused by the council? Why might I be refused Right to Buy?

I can’t think of a reason other than being bankrupt. If you’d been declared bankrupt I doubt that the council would sell the property to you or give you the discount. But you probably wouldn’t be able to get a mortgage anywhere. It would be very challenging to get a mortgage in that particular scenario.

There may also be properties, for argument’s sake, where they won’t be able to give you Right to Buy. If it was in a cemetery, for example, you wouldn’t be able to buy the property – and I don’t know whether you’d necessarily want to!

If the property was specifically for disabled people, they wouldn’t sell that because it’s part of their stock for that community of people. Similarly if it was accommodation for a school caretaker, for example, they wouldn’t want to sell as the building has a clear purpose.

What does preserved Right to Buy mean?

Over the years councils have sold properties off, and they are normally bought by a housing association.

For argument’s sake, if I lived in a property that had always been a council house, but it’s now been sold to a housing association, there would still be a preserved Right to Buy. So if I applied to the council, I could still get a Right to Buy offer based on the years I’ve been renting from the council and the housing association.

What does Right to Acquire mean?

Right to Acquire is where the property is owned by a housing association. I did one of these earlier this year where the property was rented from a housing association rather than the council.

It was probably about 15 or 20 years old and my clients had always rented from the housing association. They wanted to buy that property, so they applied for Right to Acquire. It’s Right to Buy with a council house, Right to Acquire with a housing association.

How do I apply for Right to Buy? Can a mortgage broker help?

Ordinarily, you would make the initial contact with the council, and I wouldn’t normally get involved until you’ve got the offer. We need that offer to work out how much discount you’re getting, how much mortgage you require and how much the property is valued at.

I work backwards from there. The benefit of using a mortgage broker is that we can look at all the different banks and building societies. We’re not linked to one bank or financial group. I could help organise a solicitor if you don’t have one, and I would liaise with the council, the solicitor and the lender to pull everything together.

What happens if there are delays then with my Right to Buy application?

Strictly speaking, there shouldn’t be, but in most cases it never goes through as quickly as people expect.

A mortgage offer is normally good for six months. If it goes beyond that, we would either try to extend it if possible, or worst case scenario, we would apply for a different product. That would be starting again, which can be frustrating.

But I would be dealing with the client, so they’d know why the delays are happening – and it is usually down to the council. We’d talk through it together and work out the right way to go.

What else do we need to know about Right to Buy mortgages?

It can be a little bit challenging to do it all on your own. You’ve never done this before and you’re dealing with a council and their legal department. You’re dealing with solicitors.

A mortgage broker can pull everything together for you. You end up with, in most cases, one point of contact – myself or my admin – and we would make sure at any stage during the process that you know exactly what’s happening.

That way, it’s not confusing. You know exactly where you’re at. And if there are delays, we’ll explain why and what we’ll try to do about them.